Lido wstETH (WSTETH)
Lido wstETH (WSTETH): A Wrapped Liquid Staking Token for DeFi
Lido wstETH (WSTETH) is a pivotal digital asset within the liquid staking sector of decentralized finance (DeFi). It represents a user's staked Ethereum (ETH) on the Lido protocol, but in a wrapped, non-rebasing format. Unlike its counterpart, stETH, whose balance increases daily to reflect staking rewards, the balance of WSTETH remains fixed. Instead, the value of WSTETH appreciates over time relative to ETH, as it continuously accrues the underlying staking rewards generated by the Lido validators. This design choice was made to address compatibility issues with certain DeFi protocols that struggle to handle rebasing tokens.
The primary utility of Lido wstETH (WSTETH) lies in its enhanced composability across the DeFi landscape. By providing a stable token balance, WSTETH can be seamlessly integrated into a wider range of applications, such as lending and borrowing platforms, liquidity pools on decentralized exchanges (DEXs), and as collateral for minting stablecoins. This allows holders to earn staking yield from their ETH while simultaneously deploying their capital in other yield-generating strategies, maximizing capital efficiency. The token acts as a key that unlocks the full potential of staked assets within the broader Web3 infrastructure.
Technology
Lido wstETH (WSTETH) is an ERC-20 token on the Ethereum blockchain that functions as a wrapper for Lido's stETH. The wrapping mechanism involves depositing stETH into a smart contract, which then mints a corresponding amount of WSTETH. The exchange rate between stETH and WSTETH is not 1:1; it continuously updates to reflect the accumulated staking rewards. Unwrapping reverses the process. This non-rebasing design simplifies on-chain accounting and makes WSTETH a more predictable and compatible asset for DeFi protocols that require constant token balances for their internal logic.
Tokenomics
The tokenomics of Lido wstETH (WSTETH) are directly tied to stETH and the performance of the Lido protocol's validators on the Ethereum Proof-of-Stake network. There is no fixed supply for WSTETH; it is minted when users wrap stETH and burned when they unwrap. The value of WSTETH relative to ETH increases as staking rewards are earned. Lido DAO governs the protocol, and a portion of the staking rewards (typically 10%) is directed to the DAO treasury and node operators, while the remaining 90% accrues to the stETH (and by extension, WSTETH) holders.
Ecosystem
Lido wstETH (WSTETH) is a dominant liquid staking derivative (LSD) within the Ethereum ecosystem. It enhances the utility of staked ETH by enabling its use across major DeFi protocols like Aave, MakerDAO, and Curve Finance. Its main competitor is stETH itself, along with other LSDs from protocols like Rocket Pool (rETH) and Frax (sfrxETH). The key differentiator for WSTETH is its non-rebasing nature, which grants it superior composability and makes it the preferred form of staked ETH for many complex DeFi integrations, solidifying Lido's position as a foundational layer for Ethereum staking.
Frequently Asked Questions
stETH is a rebasing token, meaning its balance increases daily to reflect staking rewards. Lido wstETH (WSTETH) is a wrapped, non-rebasing version where the token balance stays constant, but its value in terms of stETH (and ETH) appreciates over time. WSTETH is often preferred for DeFi compatibility.
You can acquire Lido wstETH (WSTETH) in two main ways: by wrapping your existing stETH on the Lido platform or by swapping for it on a decentralized exchange (DEX) like Uniswap or Curve.
Holding Lido wstETH (WSTETH) involves smart contract risk associated with the Lido protocol and the wrapping contract. Lido is one of the most audited protocols in DeFi, but users should always be aware of the inherent risks of interacting with on-chain applications.
The primary use case is to participate in the DeFi ecosystem while earning Ethereum staking rewards. You can use Lido wstETH (WSTETH) as collateral for loans, provide liquidity in pools, or engage in other yield farming strategies without unstaking your ETH.
The value of Lido wstETH (WSTETH) increases as the underlying stETH accrues staking rewards from the Ethereum network. The exchange rate between WSTETH and stETH is programmed to grow, reflecting these accumulated rewards.
Yes. You can either unwrap your Lido wstETH (WSTETH) back to stETH and then use a DEX to swap stETH for ETH, or you can directly swap WSTETH for ETH on a supported decentralized exchange. The direct withdrawal of staked ETH from the Lido protocol is also possible, subject to Ethereum's exit queue.
It's called 'liquid' because it allows you to maintain liquidity while your ETH is staked. Instead of your capital being locked and illiquid, you hold the WSTETH token, which is a tradable digital asset that can be sold or used in DeFi at any time.
Lido takes a 10% fee on staking rewards, which is split between node operators and the Lido DAO treasury. When wrapping stETH to WSTETH or unwrapping, you will also pay standard Ethereum network gas fees for the transaction.